BRAIN SNACKS · BEYOND THE REPORT · A CONVERSATION CARRYING THE RETHINK THESIS FORWARD
The hidden math of venture: alignment, incentives, and the power law
How fund size, structure, and timing influence outcomes across both private and public markets.
OCTOBER 202539 MINGUEST · JOHN RIKHTEGAR
RBCx
That power law exists in the private markets, and then when those companies graduate to the public markets, it almost resets.
John Rikhtegar · on what happens after the IPO
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414North American VC-backed IPOs from 2010 to 2022 with at least three years of trading data, the base of his analysis
+400% / -57%Cumulative three year return for the top decile, against a median for the whole cohort down 57% from the IPO valuation; the bottom 70% traded below it
Top 5%One in every twenty funds: where you have to be in a vintage year to consistently get 3x to 5x net DPI
50%+Share of all US and Canadian venture exit value of the past decade that came in 2020 and 2021 alone
ABOUT THE EPISODE
John Rikhtegar from RBCx joined us to unpack the numbers and incentives shaping today's venture ecosystem. In this episode, we explore how fund size, structure, and timing influence outcomes across both private and public markets.
Key themes:
The alignment question. Smaller funds often appear better aligned between investors and managers, but alignment alone doesn't decide results. Performance in venture depends on many factors, including strategy, timing, and company selection.
Understanding fund economics. The relationship between management fees, fund size, and incentives has a major impact on how venture firms operate. John breaks down how these mechanics influence decision-making and long-term focus.
The power law beyond private markets. Reviewing more than 400 VC-backed public listings, John found that return distribution in public markets often mirrors the few-drive-many dynamic seen in venture portfolios.
Market cycles and liquidity. Venture markets move in cycles, not straight lines. Liquidity often arrives in short bursts, emphasizing the importance of consistency and long-term perspective rather than short-term timing.
John's insights show that the venture ecosystem is shaped by both structure and behavior: alignment matters, but understanding incentives, cycles, and data matters even more.
IN HIS WORDS
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CHAPTERS
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The technology and innovation banking arm: commercial banking for VC-backed portfolio companies, debt and equity products for the funds themselves, and operators deployed into growth stage clients.
GUEST
John Rikhtegar
Director of Capital Investments at RBCx, leading direct and venture fund investment strategy and the firm's data-driven thought leadership; previously in corporate development, revenue operations and go to market at growth stage companies in Canada and the UK.
REFERENCED
David Clark
Cited on the companies with consequence in any given vintage year, and why VenCap backs the blue chip names that can access them. His episode is here →.
$68 billion market cap after day one, $26 billion a month later: his illustration of why an IPO is not the same thing as liquidity.
CONCEPTS
ECONOMICS
Guaranteed fees against variable carry
The split he uses to test alignment: how much of a partner's compensation is locked in through management fees, and how much only arrives through carried interest.
DILIGENCE
GP commit and carry split
How much the GP commits, and how the 20% carry is broken down across team members.
CYCLES
Vintage timing
2016, 2017 and 2018 had the highest concentration of companies in the top three deciles three years after listing, a byproduct of entering the public markets a few years before the peak.